Internet gambling
Background Before the 1990s, individuals who wanted to place a casino- or sports-type bet in the United States basically had two choices: they could travel to a legitimate brick-and-mortar gaming establishment or place an illegal wager through a bookmaker. However, with the emergence of the Internet in the mid-1990s, a new form of gambling appeared — online gaming casinos and sports wagering. Internet gambling can take place on any electronic device that offers Internet access anywhere on the globe. The global legal framework for Internet gambling is a complicated mix of laws and regulations. In the United States, both federal and state statutes apply. State Regulation Gambling is generally regulated at the state level, with each state determining whether individuals can gamble within its borders and whether gaming businesses can legally operate there. Five states (Illinois, Louisiana, Nevada, Oregon, and South Dakota) have enacted laws that specifically prohibit certain aspects of Internet gambling, but laws in other states that prohibit some types of gambling activities generally apply to Internet gaming as well. Federal Regulation Although gambling regulation is generally left to the states, the federal government has the authority, under the Commerce Clause of the Constitution, to regulate gambling activity that affects interstate commerce. Internet gambling falls into this category, as bets are generally placed at a personal computer in one state or country and received at a server in another state or country. Federal law generally supports state laws and regulations to ensure that interstate and foreign commerce do not circumvent them. The Wire Act,18 U.S.C. §1084. which prohibits gambling businesses from using interstate or international telecommunications wires to knowingly transmit or receive bets, is the main federal statute used to prosecute such activity.The Wire Act prohibits gambling businesses from using interstate or international wires to knowingly receive or send certain types of bets or information that could be used to place bets. It has been used successfully to prosecute Internet gambling businesses but contains some ambiguities that may limit its applicability, especially concerning the types of gambling it covers. The Department of Justice generally takes the view that the Wire Act is not limited to sports-related gambling activities, but case law on this issue is conflicting. Thus, if an Internet gaming website operating in any country (including the United States) receives a bet transmitted by an individual located in the United States, the operator has violated the Wire Act. For this reason, foreign entities offering gambling to U.S. citizens through the Internet would be subject to the Wire Act. Although some Internet gambling businesses, including foreign entities, have been successfully prosecuted under the Wire Act, courts do not agree on the applicability of certain sections of the statute. The Travel Act18 U.S.C. §1952. and the Illegal Gambling Business Act''Id.'' §1955. have also been used to prosecute gambling establishments (often located offshore) that accept bets over the telephone. International Regulation Foreign countries and jurisdictions have taken a variety of approaches to regulating on-line gaming, including legalizing some forms, seeking effective regulatory approaches, and prohibiting it entirely. Internet gambling has been legalized in over 50 countries and jurisdictions, mostly in Europe, the Caribbean, and the Australia/Pacific region. A few countries and jurisdictions specifically have prohibited it. Regulation of Online Payments Many major credit card industry participants have attempted to restrict the use of credit cards for Internet gambling but have faced challenges in their efforts to do so. Full-service credit card companies that issue their own cards and license merchants to accept cards have implemented policies prohibiting customers from using their cards to pay for Internet gambling transactions and will not license Internet gambling sites. Credit card associationsCredit card associations, such as VISA and MasterCard, license their member banks to issue bank cards, authorize merchants to accept those cards, or both. have instituted a different approach — a transaction coding system that enables association members, at their discretion, to deny authorization of properly coded Internet gambling transactions. Many major U.S. issuing banks that are members of these associations have chosen to block such transactions because of concerns over Internet gambling’s unclear legal status and the high level of credit risk associated with the industry. These efforts are hampered, however, by Internet gambling sites that attempt to disguise their transactions to keep from being blocked by the issuing banks. In addition, some association members — primarily those in foreign jurisdictions where Internet gambling may be legal — continue to acquire Internet gambling sites as merchants. Further, efforts to restrict the use of credit cards for Internet gambling can be circumvented by cardholders’ use of on-line payment providers to pay for gambling activities. With such intermediaries, issuing banks cannot necessarily determine the nature of the activity being charged. Law Enforcement Concerns Law enforcement representatives claim that the anonymity and jurisdictional issues characteristic of Internet gambling make on-line gaming a potentially powerful tool for money launderers. The believe that several characteristics of Internet gambling make it particularly vulnerable to money laundering, including the volume, speed, and international reach of Internet transactions and the offshore locations of most Internet gambling sites. However, regulatory agencies and officials from the credit card and gaming industries do not view Internet gambling as being particularly susceptible to money laundering, especially when credit cards, which create a transaction record and are subject to relatively low transaction limits, are used for payment. Likewise, credit card and gaming industry officials do not believe Internet gambling posed any particular risks in terms of money laundering. Gaming industry officials do not believe that Internet gambling is any more or less susceptible to money laundering than other types of electronic commerce and point out that, in their view, the financial industry, which is responsible for the payments system, is better suited to monitoring for suspicious activity in the area than the gaming industry itself. References Category:Gambling